Gen Z and Millennial Renters Have Lower Inflation Rates Than Overall U.S. Population For First Time in 2 Years

Rhea-AI Summary

Redfin (NASDAQ: RDFN) reports that Gen Z and millennial renters are experiencing lower personal inflation rates compared to the general U.S. population for the first time since late 2020. In December, Gen Z renters faced a 5.6% inflation rate, while millennials saw 6.1%, both below the U.S. average of 6.5%. The slowdown in rental price growth, with a 4.8% median increase in December—the smallest in 18 months—has contributed to this trend. Demand for rentals has decreased, coupled with rising supply, allowing for better negotiating power for new lease signers. Economists suggest potential benefits for those considering renting or buying homes in this evolving market.

Positive

• Gen Z and millennial renters have lower personal inflation rates than the U.S. average for the first time since late 2020.
• Median asking rent for a new lease rose only 4.8% in December, marking the smallest increase in 18 months.
• Slowing rental price growth allows younger renters to negotiate better lease terms.

Negative

• Millennials still have a higher personal inflation rate (6.8%) than the general population (6.5%).
• Overall demand for rentals has decreased since the pandemic, impacting growth.

Young adults taking on a new lease are getting some relief as rental price growth slows, helping cool their personal inflation rates

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Gen Z and millennial renters have lower personal inflation rates than the overall U.S. population for the first time since the end of 2020, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

Gen Zers and millennials who signed a new lease in December saw their cost of goods and services increase 5.6% and 6.1%, respectively, compared with a 6.5% increase for the typical American. That’s a welcome shift for young renters, who saw their personal inflation rates soar last year as rental prices skyrocketed.

This also marks the first time since the start of 2021 that Gen Zers overall have a lower personal inflation rate than the U.S. population, a shift that’s largely due to rental price growth slowing. The personal inflation rate for Gen Zers overall, taking both renters and homeowners into account, came in at 6.4% in December. Millennials, at 6.8%, still have a higher rate than the general population.

New-lease signers have comparatively low inflation rates because rental price growth is slowing

Young adults signing a new lease are benefitting from cooling inflation sooner than the typical American. That’s because rents are increasing slower than the overall cost of housing. The median U.S. asking rent for a new lease rose 4.8% year over year in December, the smallest increase in a year and a half and down from 16% last July. That’s compared with overall shelter costs, which rose 7.5%, according to the CPI. Hourly wages for the average U.S. worker rose 4.4 % year over year in January.

This is the first time asking rents have posted a smaller increase than the overall cost of housing in a year and a half.

“Shelter” inflation encompasses both rental payments (including existing leases) and the amount homeowners would pay in rent for their own house. That means renters who are locked into yearlong leases, along with homeowners who bought at the peak of the market, will be slower to see cooling inflation reflected in their bank accounts. Shelter inflation hasn’t slowed yet because most people are paying a “shelter” price that’s reflective of last year’s hot rental and housing market, which has since cooled significantly amid elevated mortgage rates. It’s likely to peak soon.

“Ebbing price growth means renters moving now may be getting a better deal than those who signed a new lease in late 2021 or 2022. Asking rents have already dropped from the apex they reached last summer and they’ve fallen from a year ago in many parts of the country, including Phoenix, Austin and Los Angeles,” said Redfin Senior Economist Sheharyar Bokhari. “People looking to move now may also want to take advantage of declining demand and negotiate with landlords about perks like free parking or a free month’s rent–and those who are staying put may have some bargaining power when renewing their lease. Rental prices are likely to fall from here nearly everywhere in the country, so it may also be worth waiting a few months if you’re not in a hurry to sign a new lease.”

“Those who are on the fence about continuing to rent or buying their first home may also benefit from waiting a few months before locking in a new lease,” Bokhari continued. “If mortgage rates and home prices continue dropping from their peak, entering the housing market will be more affordable than it is today. Depending on individual circumstances, that could shift the math on whether renting or buying makes more financial sense.”

Slowing rent growth has an outsized impact on Gen Zers and millennials because they’re typically the people signing new leases. Just 39% of Americans under 35 years old own their home, and 62% of those aged 35 to 44 own theirs. That’s compared with 70%-plus homeownership rates for Americans 45 and older.

Demand for rentals has tapered off since the pandemic moving frenzy

Rental price growth is slowing because of falling demand, with relatively few people moving or planning to move to a new residence. Rental costs that skyrocketed over the last year and a half, along with inflation in other parts of life, makes moving to a new rental unaffordable for many Americans.

Inflation soared in early- to mid-2022 partly because of skyrocketing rental costs and home prices. Shelter inflation makes up about one-third of the value of goods and services included in overall inflation measures.

At the same time, supply is increasing due to an influx of newly built apartments and homeowners who want to hold onto relatively low mortgage rates renting out their properties rather than selling.

To view the full report, including charts and methodology, please visit: https://www.redfin.com/news/gen-z-millennial-renters-lower-inflation

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country's #1 real estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 5,000 people.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230208005213/en/

Redfin Journalist Services:

Ally Braun, 206-588-6863

press@redfin.com

Source: Redfin

FAQ

What are the personal inflation rates for Gen Z and millennials as reported by Redfin?

As of December, Gen Z renters experienced a 5.6% inflation rate, while millennials faced a 6.1% rate.

How does the rental price growth in December compare to previous months?

The median asking rent increased by only 4.8% in December, the smallest rise in 18 months, down from 16% in July.

What impact does slowing rent growth have on young renters?

Slowing rent growth allows Gen Z and millennials to negotiate better lease terms, benefiting those moving now.

What does Redfin's report say about rental demand changes?

The report indicates that demand for rentals has tapered off since the pandemic, affecting rental price growth.

What should renters consider according to Redfin economists?

Economists suggest that those on the fence about renting or buying might benefit from waiting a few months for more favorable conditions.